UK Calls for “Urgent International Action” After Near-Implosion of UK Pension Funds – USA Herald
The Bank of England on Tuesday called for “urgent international action” from regulators on non-bank financial institutions after it was obliged to rescue U.K. pension funds in September.
Many pension funds were hours from downfall when the central bank intervened in the long-dated bond market. It came after a series of massive moves in interest rates on U.K. government debt exposed vulnerabilities in liability-driven investment (LDI) funds, which are held by U.K. pension schemes.
In its latest financial stability report published Tuesday, the Bank said had it not acted, “the stress would have significantly affected households’ and businesses’ ability to access credit.”
Its temporary emergency bond-buying program allowed LDI funds time to shore up their liquidity positions and ensure the country’s financial stability.
The central bank said it will begin an “exploratory scenario exercise” focused on non-bank financial institutions in order to better understand and mitigate the associated risks.
